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Wednesday, 13 July 2011

GUEST POST: Stateless Standards

Regular readers will have noticed that I’ve been a bit distracted recently, the reason for which is mostly that I’ve been moving into a new office in Dominion Road (about which more in due course), and partly because local politics is presently so lack-lustre it’s barely worth commenting on.

But rather than disappoint both of you regulars by having just spartan offerings scattered across the blog, I’ve decided instead to seize the opportunity to post a few of the more provocative pieces from the earlier pages of Not PC andThe Free Radical magazine. So here, from the 1996 pages of what was then Lindsay Perigo’s Free Radical, is a classic by the curmudgeonly Bob Jones.

Stateless Standards

The debate following publication of my book Prosperity Denied* has exposed the real beliefs of those who support the Reserve Bank Act while purporting to be market adherents. What in fact they believe in is nothing more than private ownership. But ownership is meaningless if subject to controls and taxation.

As I explained in my book, true market believers recognise that all economic laws impede the market’s functioning** and ultimately result in the opposite outcome of that intended.

For example, let us imagine there were no health and hygiene laws applying to restaurants or no building standards***, and consider the possible outcome.

The socialist, with his inherent contempt for individuals capability of making their own judgements, would claim the outcome would be mass poisoning. Indeed, it goes without saying by inference, that anyone who supports the current regime of restaurant health standards has that view, otherwise he would not see the need for such regulations. But is he correct?

If there were no standards regime, undoubtedly and inevitably some customers would be poisoned and some even die.

But mindful of that possibility, people would simply not eat out—at least in theory.

Yet, as is evident, people do want to eat out—and it’s here the market would swing into play, filling the void of people’s desires.

What would eventuate would be Moody’s or Standard & Poors type rating organisations establishing their own hygiene codes****, which would probably be similar to the existing ones currently monitored by local government inspectors.

So why bother, you ask?

Well, the answer is the same as always when it comes to comparing the relative performance of private and public ownership.

A private standards setting and policing organisation, unlike the current public one, would be more efficient and therefore cheaper, and more effective.

The public health inspector will always be more lenient on offenders for a variety of reasons. Currently a non-compliant kitchen owner is issued a notice allowing him a period of time to correct the problem, but still allowing him to carry on business. A private entity could not afford that risk. Non-compliance would mean the immediate withdrawal of the rating certificate, perhaps in the form of a colourful sign displayed in the door just like credit card signs. If it wasn’t there then customers would shy away.

The net result: higher standards and lower policing costs, and also a fairer user-pay cost burden. The cost of the current inspector system falls on all rate payers. This way, the cost would be incurred by restaurant owners and be borne, albeit indirectly, by restaurant patrons.

A lax inspectorate would risk their entire business and additionally, given a poisoning occurrence, could open up the ratings entity to a damages action.

And what of restaurants not participating? I doubt if any would survive but should they, well, the customers accepted the risk with open eyes and any consequence would be their problem alone. The market economy is all about individuals making their own uninterfered-with decisions, weighing risks, and bearing the consequences of their judgements.

Frankly, I doubt any restaurants would survive if they didn’t buy a rating company’s services.

Exactly the same thing can be said about building standards, like restaurants, administered at great cost***** and generally inefficiently with only a marginal (and therefore unfair) user-pay aspect.

Who would buy a high-rise apartment, or even an ordinary bungalow, if it didn’t comply with an established ratings organisation’s standards?

Who would rent a factory, apartment or office if it didn’t have a compliance certificate?

The answer is: nobody.

Yet building controls and the permit and inspection system unnecessarily remain in public control, are notoriously inefficient and, in not being user-pays, are inequitable.

There’s a general belief that New Zealand enjoys a market economy, yet nothing could be further from the truth. On a scale of one to ten, we’re probably only on the second rung at best.

Currently, all that can be said about the New Zealand economy is that it’s a private ownership, private enterprise system, but a market economy it ain’t. Basically, it’s fascist, with its private ownership structure subject to a mass of directions, licensing and other control factors vested in central and local government.

* * * * *

* The book was a full-blooded attack on what was then Don Brash’s Reserve Bank, and the Reserve Bank Act that set it up (partly, it must be said, because as a developer-as-was Bob fancied a bit of inflation). A decade-and-a-half after publication, sitting midst the wreckage that the Reserve Bank’s meddling with the money supply created, you’d have to say Bob is at least partially vindicated.

** Especially those that set up a Banking Czar to dictate market rates!

**** That is to say, Moody’s or Standard & Poors type rating organisations without the sort of govt monopoly that Moody’s and Standard & Poors enjoy, and without which their incompetence in the financial crisis would have been duly punished by the market—if indeed they had not already been punished for manifest prior incompetence.

***** And, as the leaky homes fiasco proved, at great (and unnecessary) financial risk to ratepayers.

2 comments:

This is great. Well written to a level of understanding that most economically uninformed of NZers could understand.

New Zealanders enjoy a naïve protectorate that comes from choosing to remain economically illiterate. Their elected version of altruism is fueled by politicians who don’t want them to worry about such things. NZers desire to be shielded from the big-bad-world ensures a continual demand for Governments standing by to absolve them from the repercussions of thinking and personal choice.

NZers are superstitiously wary of private enterprise and a free-market. They want their Government to continually tamper with it to give them the false impression that it can be controlled and that they can be protected from their own uneducated fear. They continue to believe that that the fairest system is one instituted by a Government. They will never buy-in to the proven fact that private enterprise trumps Government in every aspect of their best-interests because they will always believe that Government should run the economy.

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